Section 2.01c: Texas Cash-Out [50(a)(6)] Refinance
Section 2.01c – Texas Cash-Out Refinance First Mortgages [Texas Section 50(a)(6) Mortgages] In This Product Description This product description contains the following topics. Overview ............................................................................................................... 2 Related Bulletins ................................................................................................... 2 Loan Terms ........................................................................................................... 3 Eligible First Mortgage Products ....................................................................... 3 Maximum LTV/TLTV/ HTLTV and Loan Amount .............................................. 4 Maximum Number of Section 50(a)(6) Mortgages ........................................... 5 Prepayment Penalty.......................................................................................... 5 Assumptions ..................................................................................................... 5 Eligible Transactions ............................................................................................. 6 Construction-to-Permanent (CP) Loans ........................................................... 6 Refinances ........................................................................................................ 6 Temporary Buydowns ....................................................................................... 6 Refinances ............................................................................................................ 7 General ............................................................................................................. 7 Refinancing an Existing Section 50(a)(6) Mortgage ......................................... 7 Use of Loan Proceeds ...................................................................................... 7 Delayed Financing Cash-Out Refinance .......................................................... 8 Streamline Refinance........................................................................................ 8 Secondary Financing ............................................................................................ 9 Geographic Restrictions ..................................................................................... 10 Occupancy/Property Types ................................................................................ 10 General ........................................................................................................... 10 Eligible Properties ........................................................................................... 10 Rural Homestead ............................................................................................ 11 Urban Homestead ........................................................................................... 12 Ineligible Properties ........................................................................................ 13 Eligible Borrowers ............................................................................................... 14 Qualifying Ratios ................................................................................................. 14 Credit Score Requirements ................................................................................ 14 Cash Reserve Requirements ............................................................................. 15 Mortgage Insurance Requirements .................................................................... 15 Appraisal Requirements ..................................................................................... 15 AUS Submission, Recommendations and Tolerances ....................................... 16 Loan Submission and Underwriting .................................................................... 17 General ........................................................................................................... 17 Pre-Closing and Post-Closing Quality Control Review ................................... 17 Rates, Points and Lock-Ins ................................................................................. 18 Application Disclosure and Issues ...................................................................... 19 Disclosure Requirements.................................................................................... 20 Closing and Loan Settlement Documentation .................................................... 22 Exhibit #1 – Allowable Fees and Charges .......................................................... 27 Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 1 of 27 Overview Product Summary A Texas equity take-out mortgage (cash-out refinance transaction) is defined and authorized under the provisions of Section 50(a)(6), Article XVI of the Texas Constitution. This product description is designed to provide information on Texas cash-out refinance [Section 50(a)(6)] first mortgage transactions. A Texas Section 50(a)(6) cash-out refinance first mortgage must be secured by a single unit, owneroccupied primary residence constituting the borrower’s homestead under Texas law. Loans secured by any additional real or personal property other than the borrower’s homestead will not be acceptable. The guidelines contained herein apply to both new mortgages (i.e., the property is not subject to the lien of an existing mortgage) and mortgages that represent the refinance of an existing Section 50(a)(6) lien. Once a borrower obtains a Texas Section 50(a)(6) mortgage (either a first lien or a subordinate lien), any subsequent refinancing of the homestead property will be considered a cash-out refinance transaction if any of the proceeds are used to pay off the Section 50(a)(6) mortgage, even if the borrower does not receive any cash out of the refinance proceeds. SunTrust Mortgage, Inc. will retain the servicing of all Agency Texas Section 50(a)(6) cash-out refinance first mortgage loans. References: See the topic Geographic Restrictions for information on lenders eligible to originate Agency Texas Section 50(a)(6) cash-out refinance transactions. Agency Texas Section 50(a)(6) cash-out refinance transactions must be underwritten by approved delegated Correspondents. See the topic Loan Submission and Underwriting for additional information. Related Bulletins General Related bulletins are provided below in PDF format. To view the list of published bulletins, select the applicable year below. 2015 2014 2013 Note: There are no related bulletins for 2010, 2011, and 2012. Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 2 of 27 Loan Terms Eligible First Mortgage Products Agency conforming fully amortizing Fixed Rate, 7/1 & 10/1 LIBOR ARMs are the ONLY SunTrust first mortgage loan products eligible under the Texas Section 50(a)(6) Cash-Out Refinance loan program. Agency conforming fully amortizing Fixed Rate and Agency conforming fully amortizing 7/1 & 10/1 LIBOR ARM transactions MUST be processed through Fannie Mae’s Desktop Underwriter (DU). These transactions are eligible for the streamlined processing requirements recommended by DU, including the streamlined income and asset verification requirements and credit-related documentation requirements. All loans must receive an “Approve/Eligible” recommendation. Note: SunTrust Mortgage will not fund any Texas Section 50(a)(6) cash-out refinance transaction originated with an Agency conforming fully amortizing Fixed Rate or Agency conforming fully amortizing 7/1 or 10/1 LIBOR ARM first mortgage transaction that is traditionally underwritten or processed through Freddie Mac’s Loan Prospector (LP). All Texas Section 50(a)(6) Cash-Out Refinance first mortgage transactions must comply with the more restrictive of the applicable first mortgage guidelines or the Texas Section 50(a)(6) Cash-Out Refinance guidelines, as outlined in this product description. Reference: See Section 2.01: Agency Loan Programs of the Correspondent Seller Guide for Agency guidelines not addressed in this product description. EXCEPT AS OUTLINED IN THIS PRODUCT DESCRIPTION, NO ADDITIONAL EXCEPTIONS ARE ALLOWED. Continued on next page Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 3 of 27 Loan Terms, Continued Maximum LTV/TLTV/ HTLTV and Loan Amount PRIMARY RESIDENCE – AGENCY FULLY AMORTIZING FIXED RATE (Terms 10-30 Years; No Minimum Loan) Max 1 LTV/TLTV/HTLTV 1 80%/80%/NA 1 Max Loan $417,000 Minimum Credit Score 660 1 # of Units Maximum Cash-Out Reserves 1 $417,000 Per DU Traditionally underwritten and Freddie Mac’s Loan Prospector (LP) loans are not eligible. All loans MUST be processed through DU and receive an “Approve/Eligible” recommendation. Home Equity Lines of Credit (HELOCs) are not permitted. PRIMARY RESIDENCE – AGENCY FULLY AMORTIZING 7/1 & 10/1 LIBOR ARMs (7/1 LIBOR ARM: Terms 10-30 Years; No Minimum Loan) (10/1 LIBOR ARM: Terms 15-30 Years; No Minimum Loan) Max 1 LTV/TLTV/HTLTV 1 75%/75%/NA 1 Max Loan $417,000 Minimum Credit Score 660 # of Units Maximum Cash-Out Reserves 1 $417,000 Per DU 1 Traditionally underwritten and Freddie Mac’s Loan Prospector (LP) loans are not eligible. All loans MUST be processed through DU and receive an “Approve/Eligible” recommendation. Home Equity Lines of Credit (HELOCs) are not permitted. Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 4 of 27 Loan Terms, Continued Maximum Number of Section 50(a)(6) Mortgages The homestead property may be encumbered with only one Section 50(a)(6) mortgage at one time. After the disbursement of a Texas Section 50(a)(6) cash-out refinance transaction, there can be no other outstanding Section 50(a)(6) mortgage lien secured by the homestead property. Note: A Texas Section 50(a)(6) cash-out refinance transaction may not be originated on a homestead property that is also encumbered with a reverse mortgage. Prepayment Penalty There will be no prepayment penalty on Texas Section 50(a)(6) cash-out refinance first mortgage transactions. Assumptions Texas Section 50(a)(6) cash-out refinance first mortgages are not assumable. Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 5 of 27 Eligible Transactions Constructionto-Permanent (CP) Loans Texas Section 50(a)(6) cash-out refinance first mortgages are not eligible for construction-to-permanent transactions. Refinances Reference: See the topic Refinances in this product description for information. Temporary Buydowns Temporary buydowns are not eligible. Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 6 of 27 Refinances General In all cases, the Texas Section 50(a)(6) Cash-Out Refinance loan program will be underwritten to the MORE RESTRICTIVE of the applicable first mortgage guidelines or the Texas Section 50(a)(6) Cash-Out Refinance loan program guidelines. Reference: See Section 2.01: Agency Loan Programs of the Correspondent Seller Guide for additional restrictions regarding refinance transactions. Refinancing an Existing Section 50(a)(6) Mortgage When the borrower is refinancing an existing Section 50(a)(6) mortgage, at least 12 months must have elapsed since any previous Section 50(a)(6) mortgage secured by the homestead property was closed. This 12 month seasoning requirement prevents churning of cash-out refinance loans on a single homestead. Note: When the purpose of the loan is to change the rate and term of an existing Texas Section 50(a)(6) mortgage and the property is now located in a declining market, the borrower can finance only the unpaid principal balance of the existing mortgage (rounded up to the nearest $100). Use of Loan Proceeds The total proceeds from a Texas Section 50(a)(6) cash-out refinance transaction may not be used to improve the homestead property if a mortgage for that purpose could have been otherwise classified as an (a)(5) home improvement loan under the provisions of the Texas constitution. The borrower may NOT be required, as a condition of the loan, to apply the proceeds of the loan to repay any other debt except debt already secured by the homestead property or debt to a lender other than the lender making the loan. Note: This provision does not prohibit a borrower from including unsecured debt in the cash-out refinance transaction; however, the borrower may not be required to pay off the unsecured debt. If any of the proceeds are used to pay off (or to pay down) any debts the borrower owes the lender that are not secured by the homestead property, the lender must document the voluntary nature of the payment by having the borrower execute the Owners Affidavit of Compliance form. Reference: See Owners Affidavit of Compliance Requirements” topic for additional information. in the “Disclosure Aside from the guidelines listed above, there are no other restrictions on the use of the loan proceeds from a Texas Section 50(a)(6) cash-out refinance transaction. Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 7 of 27 Refinances, Continued Delayed Financing Cash-Out Refinance Delayed financing cash-out refinance transactions are eligible subject to the Texas 50(a)(6) requirements outlined in this product description, which includes limitations on the use of proceeds. All other standard Agency delayed financing cash-out refinance guidelines apply. Streamline Refinance Texas Section 50(a)(6) cash-out refinance first mortgage transactions are NOT eligible for any streamline refinance transaction. Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 8 of 27 Secondary Financing General In all cases, the Texas Section 50(a)(6) Cash-Out Refinance loan program will be underwritten to the MORE RESTRICTIVE of the applicable first mortgage guidelines or the Texas Section 50(a)(6) Cash-Out Refinance loan program guidelines. Reference: See Section 2.01: Agency Loan Programs of the Correspondent Seller Guide for additional restrictions regarding secondary financing. New subordinate financing is not permitted. Since the proceeds from a Texas Section 50(a)(6) cash-out refinance transaction is required to pay off any existing first mortgage that is secured by the homestead property, the only instance in which the TLTV limitation will apply is one in which a pre-existing second mortgage that is NOT a Section 50(a)(6) mortgage is being subordinated to a new Section 50(a)(6) mortgage. There cannot be more than one Texas Section 50 (a)(6) loan secured by a property at any time. Therefore, any second mortgage lien that is subject to Texas Section 50 (a)(6) may not be re-subordinated if the new first mortgage is subject to Section 50 (a)(6); the second mortgage lien must be paid off and closed. Note: Any existing home equity line of credit is considered a Texas Section 50(a)(6) second mortgage, and may not be re-subordinated to the new loan. If an existing subordinate lien is not paid off, it must be re-subordinated to the new first lien, and all the following subordinate financing documentation must be included in the loan file, so terms can be appropriately disclosed. A copy of the note, and A copy of the security instrument, and A copy of the recorded subordination agreement must be maintained in the loan file. For non-Texas 50 (a) (6) transactions, a renewal and extension agreement may be acceptable in lieu of a subordination agreement. Examples of acceptable pre-existing second mortgages that may be resubordinated include the following: purchase money, owelty partition, and home improvement. Reference: See the topic Loan Terms for the maximum allowable TLTV. Home Equity Lines of Credit (HELOCs) Primary residence first mortgage transactions with secondary financing that consist of a Home Equity Line of Credit (HELOC) in the state of Texas are NOT eligible under SunTrust’s Texas Section 50(a)(6) Cash-Out Refinance Loan Program. Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 9 of 27 Geographic Restrictions General A Correspondent Lender that intends to sell Texas Section 50 (a) (6) cash-out refinance mortgages to SunTrust Mortgage: must be lawfully authorized to originate such loans, must have the Texas Section 50 (a)(6) cash-out refinance loan transaction reviewed by an attorney, and is responsible for correctly identifying and complying with the requirements of a Texas Section 50 (a)(6) cash-out refinance loan. Occupancy/Property Types General In all cases, the Texas Section 50(a)(6) Cash-Out Refinance loan program will be underwritten to the MORE RESTRICTIVE of the applicable first mortgage guidelines or the Texas Section 50(a)(6) Cash-Out Refinance loan program guidelines. Reference: See Section 2.01: Agency Loan Programs of the Correspondent Seller Guide for additional restrictions regarding occupancy/property types. Eligible Properties Eligible properties include the following: 1 unit attached and detached primary residences, warrantable condominiums, PUDs, rural and urban properties, and unique properties (i.e., earth houses, geodesic domes, historically registered homes, log homes, etc.). Note: Marketability MUST be established for transactions involving unique properties. The Certification of Project Compliance: Condominium Lender Warranties Agency and Non-Agency Loan Products (COR 0212a) must be completed for all warrantable condo projects. References: See Section 1.06: SunTrust Condominium and PUD Approval Requirements of the Correspondent Seller Guide for warranty guidelines. See Section 2.01: Agency Loan Programs of the Correspondent Seller Guide for additional information regarding PUDs. Continued on next page Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 10 of 27 Occupancy/Property Types, Continued Rural Homestead Texas law limits the size of a rural homestead to one hundred (100) acres. Note: Please refer to the applicable first mortgage product description for maximum acreage requirements for rural properties. In all cases, the Texas Section 50(a)(6) Cash-Out Refinance loan program will be underwritten to the MORE RESTRICTIVE of the applicable first mortgage guidelines or the Texas Section 50(a)(6) Cash-Out Refinance loan program guidelines. Agricultural rural homestead properties are generally not permitted. If the borrower owns any adjacent land, he or she must submit appropriate evidence (such as a survey) indicating that the mortgaged homestead property is a separate parcel that does not exceed 100 acres. The appraisal for the property and the acknowledgment of “fair market value” must not take into consideration any property other than the homestead. The survey (or other acceptable evidence) must demonstrate that the homestead property and any adjacent land are separate parcels and that the homestead property is a separately platted and subdivided lot for which full ingress and egress is available. The lender may not have any interest (such as an option to purchase, a security interest, or an easement) in any parcel adjacent to the homestead property that is owned by our borrower, if such interest could constitute additional security for the cash-out refinance transaction. Any costs that the borrower incurs for the survey may be subject to the 3% limitation on fees that can be charged to the borrower in connection with a Texas Section 50(a)(6) cash-out refinance transaction. This is also true with respect to any additional costs the borrower incurs for a property that was previously an undivided lot when – as a condition of making the mortgage loan – it was required that the borrower subdivide the lot and obtain a new plat and survey for the property. Continued on next page Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 11 of 27 Occupancy/Property Types, Continued Urban Homestead A homestead will be considered urban if the property is: located within the limits of a municipality or its extraterritorial jurisdiction or a platted subdivision, and is served by police protection, paid or volunteer fire protection, and at least three (3) of the following services are provided by a municipality or under contract to a municipality: electric, natural gas, sewer, storm sewer, and water. Texas law limits the size of an urban homestead to ten (10) acres. If the borrower owns any adjacent land, he or she must submit appropriate evidence (such as a survey) indicating that the mortgaged homestead property is a separate parcel that does not exceed ten (10) acres. The appraisal for the property and the acknowledgment of “fair market value” must not take into consideration any property other than the homestead. The survey (or other acceptable evidence) must demonstrate that the homestead property and any adjacent land are separate parcels and that the homestead property is a separately platted and subdivided lot for which full ingress and egress is available. The lender may not have any interest (such as an option to purchase, a security interest, or an easement) in any parcel adjacent to the homestead property that is owned by our borrower, if such interest could constitute additional security for the cash-out refinance transaction. Any costs that the borrower incurs for the survey may be subject to the 3% limitation on fees that can be charged to the borrower in connection with a Texas cash-out refinance transaction. This is also true with respect to any additional Section 50(a)(6) costs the borrower incurs for a property that was previously an undivided lot when – as a condition of making the mortgage loan – it was required that the borrower subdivide the lot and obtain a new plat and survey for the property. Continued on next page Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 12 of 27 Occupancy/Property Types, Continued Ineligible Properties Ineligible properties include the following: 2-4 unit primary residences, Agricultural properties, such as farms or ranches, bed and breakfast properties, boarding houses, condominium hotels or condotels, cooperatives, houseboat projects, investment properties, land development properties, manufactured housing, non-warrantable condominium/PUD projects, on-frame modular construction, second homes, properties that are not readily accessible by roads that meet local standards. properties that are not suitable for year-round occupancy regardless of location, timeshare or segmented ownership projects, and vacant land. Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 13 of 27 Eligible Borrowers General Borrower eligibility follows the MORE RESTRICTIVE of the applicable first mortgage guidelines or the Texas Section 50(a)(6) Cash-Out Refinance loan program guidelines. Reference: See Section 2.01: Agency Loan Programs of the Correspondent Seller Guide for additional restrictions regarding eligible borrowers. Inter Vivos Trusts An inter vivos revocable trust that meets borrower eligibility criteria, may be a borrower under a Texas Section 50(a)(6) mortgage, provided that the trust meets the requirements for a "qualifying trust" under Texas law for purposes of owning residential property that qualifies for the homestead exemption. Reference: See Section 1.08: Loan Delivery and Purchase Review of the Correspondent Seller Guide for additional information. Ineligible Borrowers Ineligible borrowers include the following: corporations and partnerships, foreign nationals, co-signers, Land Trusts (including Illinois Land Trusts) non-occupant co-borrowers, and borrowers with diplomatic immunity. Qualifying Ratios General A maximum debt-to-income ratio of 45% is required. Debt-to-income ratios of 45.01-50% is permitted when: all borrowers have a 720 minimum credit score, and a maximum 80% LTV. Note: When the above requirements are not met for 45.01-50% DTI transactions, the maximum DTI is 45%. Credit Score Requirements General A minimum 660 credit score is required for ALL borrowers, regardless of the DU “Approve/Eligible” recommendation. Reference: See the “Qualifying Ratios” topic previously presented for additional information. ALL borrowers on the loan must have at least one (1) credit score. If a borrower does not have a credit score, the DU recommendation will be “Out of Scope” and the loan will NOT be eligible. Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 14 of 27 Cash Reserve Requirements General The DU Findings Report will identify the amount of assets to be verified (which may be less than the actual amount input into DU), including any reserves necessary to the DU recommendation. Cash received by the borrower at closing is NOT considered “reserves” or an asset. Mortgage Insurance Requirements General Mortgage insurance is NOT required. Appraisal Requirements General An appraisal must be obtained to determine the current property value. The appraisal must be a full appraisal with an interior and exterior inspection (i.e., 1004/70, or Form 1073/465). Note: Fannie Mae’s DU Property Inspection Waiver (PIW) is NOT acceptable. Reference: See Section 2.01: Agency Loan Programs and Section 1.07: Appraisal Guidelines of the Correspondent Seller Guide for additional information concerning appraisals and appraisal requirements. Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 15 of 27 AUS Submission, Recommendations and Tolerances AUS Data Input Purpose of Refinance When inputting loan into DO/DU, users must select one of the following cash-out refinance “Purpose of Refinance” categories in Section II (Property Information and Purpose of Loan): Cash-Out/Other, or Cash-Out/Debt Consolidation. Note: Even in situations where the borrower is not receiving cash back [i.e., when borrower is paying off a previous Section 50(a)(6) lien], the “Purpose of Refinance” MUST still be reflected as one of the categories listed above. Under no circumstances should the “Purpose of Refinance” category be indicated as “CashOut/Home Improvement,” “Limited Cash-Out,” or “No Cash-Out Rate/Term - $100 max.” AUS Submission All loans MUST be processed through Fannie Mae’s Desktop Underwriter (DU) and receive an “Approve/Eligible” recommendation. Tolerances Reference: See AUS tolerances for DU “Approve/Eligible” loans within the topic “AUS Recommendations, Resubmissions and Forms” in Section 2.01: Agency Loan Programs. Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 16 of 27 Loan Submission and Underwriting General All Texas Section 50(a)(6) cash-out refinance first mortgage loans must be underwritten by Correspondent Lenders with delegated underwriting authority and acceptable licensing. SunTrust Mortgage underwriters will not underwrite these transactions. Contract underwriters are NOT allowed to underwrite Texas Section 50(a)(6) cash-out refinance first mortgages. A fully completed initial application must be submitted in all underwriting packages. Pages three (3) and four (4) of the initial application must be signed and dated by all borrowers that are going to sign the note (the fourth page does not have to be signed and dated if it is blank). A copy of the tax certificate and title commitment must be submitted in the underwriting package. Reference: See Section 1.05: Underwriting of the Correspondent Seller Guide for additional information. Pre-Closing and PostClosing Quality Control Review A pre-closing and post-closing quality control review MUST be performed an ALL Texas cash-out refinance first mortgage transactions. This quality control review procedure will closely scrutinize the following: fees charged, compliance with the twelve day “cooling off” period requirement, compliance regarding the disclosure and execution of all applicable application and closing documentation, and compliance with all additional closing requirements. Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 17 of 27 Rates, Points and Lock-Ins Program Codes The following table shows program codes for Agency Texas Section 50(a)(6) CashOut Refinances: Loan Program Agency Fixed Rate (fully amortizing) – Texas Section 50(a)(6) Cash-Out Refinance 10-15 Years, Full Doc Agency Fixed Rate (fully amortizing) – Texas Section 50(a)(6) Cash-Out Refinance 16-30 Years, Full Doc Agency 7/1 LIBOR ARM (fully amortizing) – Texas Section 50(a)(6) Cash-Out Refinance (all terms), Full Doc Agency 10/1 LIBOR ARM (fully amortizing) – Texas Section 50(a)(6) Cash-Out Refinance (all terms), Full Doc Lock-Ins Program Code C15TX C30TX 71FNTX 10FNTX Reference: See Section 1.03: Loan Registration and Lock-in Procedures of the Correspondent Seller Guide for further instructions concerning lock-in policies. Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 18 of 27 Application Disclosure and Issues General The Texas constitutional amendment sets out specific requirements for disclosures to be presented by the lender to the borrower/owner and their spouses (if applicable) at application and at closing. These disclosures are in addition to all other disclosures that a lender is already required to provide by both state and federal law. Consumer Handbook on Adjustable Rate Mortgages The Consumer Handbook on Adjustable Rate Mortgages must be given to borrowers prior to loan application. The borrowers must sign an acknowledgement of receipt of the Handbook on the program disclosure. Reference: See Section 1.08: Loan Delivery and Purchase Review for further information on consumer disclosures, consumer handbooks, compliance and predatory lending. ARM Program Disclosures The applicable ARM program disclosure must be presented to and signed by the borrower prior to loan application. The form must be present in the file prior to funding. Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 19 of 27 Disclosure Requirements Affidavit of Fair Market Value of Homestead Property The Affidavit of Fair Market Value of Homestead Property must be signed and dated by all borrowers/owners, their spouses and the lender at the time of closing. Affidavit Regarding Receipt of Loan Application and HUD-1 PRIOR to Closing A Texas Section 50(a)(6) cash-out refinance transaction may be closed at any time during normal business hours on the NEXT BUSINESS DAY FOLLOWING the calendar day on which each borrower/owner of the homestead (and their spouse) receives and reviews a copy of the loan application (if not previously provided) and a final itemized disclosure (HUD-1) of the actual fees, points, interest, costs and charges that will be charged at closing. The copy of the loan application received and reviewed by each borrower/owner of the homestead (and their spouse), may be, but is NOT required to be the “final loan application” used for closing. The HUD-1 received and reviewed by each borrower/owner of the homestead (and their spouse) MUST be the final HUD-1 used for closing. NO EXCEPTIONS. Each borrower/owner of the homestead (and their spouse) must acknowledge in writing by signing an affidavit, at or prior to closing, that they have received a copy of the loan application and a final HUD-1 (or revised final HUD-1) in accordance with the time frame listed above. It is NOT acceptable to obtain a written consent from the borrower/owner of the homestead (or their spouse) to close the loan prior to one business day after the borrower’s/owner’s (and their spouse’s) receipt of a copy of the loan application and a final itemized disclosure, whether based upon a bona fide emergency or other reason offered by the borrower/owner (or their spouse) of the homestead. Note: The affidavit regarding receipt of a copy of the loan application and final HUD1 PRIOR to closing will be provided by the closing agent/attorney. Disclosure in Security Instrument The security instrument securing the cash-out refinance transaction must contain a disclosure that the extension of credit is the type of credit defined by Section 50(a)(6), Article XVI, Texas Constitution. Note: The disclosure referenced above is in bold caps on page #1 of the Texas Home Equity Security Instrument (First Lien). Continued on next page Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 20 of 27 Application Disclosure and Issues, Continued Notice Concerning Extensions of Credit The Notice Concerning Extensions of Credit must be provided to all borrowers/owners and their spouses and signed no later than 12 days prior to the loan closing. Owners Affidavit of Compliance The Owners Affidavit of Compliance must be provided to all borrower/owners and their spouse(s) and signed at the time of closing. Note: The Owners Affidavit of Compliance form will be provided by the closing agent/attorney. Execution of this form also complies with the requirement that the borrower document the voluntary nature of paying off debt with the proceeds from the refinance transaction and confirmation that copies of all executed documents relating to the loan closing have been received. Texas Home Equity Affidavit and Agreement The Texas Home Equity Affidavit and Agreement (Fannie Mae/Freddie Mac Form 3185) must be provided to all borrower/owners and their spouse(s) and signed at the time of closing. This document must also be recorded with the Texas Home Equity Security Instrument. Texas Loan Agreement Addendum The Texas Loan Agreement Addendum must be provided to all borrowers/owners and their spouses and signed at the time of closing. Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 21 of 27 Closing and Loan Settlement Documentation General Texas Section 50(a)(6) cash-out refinance transactions may be closed only at the office of the lender, an attorney, or a title company AND must close on a business day recognized by the lender. These loans are NOT authorized to close on a Saturday, a Sunday, or any federal or state holiday. A Texas Section 50(a)(6) cash-out refinance first mortgage transaction cannot be closed until after a 12-day “cooling off” period in which the borrower/owner and their spouse is allowed to change his or her mind about obtaining the mortgage. The “cooling off” period is based on calendar days and runs from the LATER of the date of the initial loan application (1003) or the date that the borrower/owner and their spouse receives the Notice Concerning Extensions of Credit . A Texas Section 50(a)(6) cash-out refinance transaction may be closed at any time during normal business hours on the NEXT BUSINESS DAY FOLLOWING the calendar day on which each borrower/owner of the homestead (and their spouse) receives and reviews a copy of the loan application (if not previously provided) and a final itemized disclosure (HUD-1) of the actual fees, points, interest, costs and charges that will be charged at closing. The copy of the loan application received and reviewed by each borrower/owner of the homestead (and their spouse), may be, but is NOT required to be the “final loan application” used for closing. The HUD-1 received and reviewed by each borrower/owner of the homestead (and their spouse) MUST be the final HUD-1 used for closing. NO EXCEPTIONS. The borrower’s first payment must be due no later than two (2) months after closing. Unless specified below, all closing forms and documentation should follow standard SunTrust guidelines. Reference: See Section 1.08: Loan Delivery and Purchase Review of the Correspondent Seller Guide for standard SunTrust guidelines. Closing Instructions The lender must provide the title company with a detailed closing instruction letter (and require an acknowledgment of its receipt). The closing instructions must require the title company to conduct the loan closing in a way that ensures the following: the closing does not take place before the stated closing date (which must comply with the 12-day “cooling off” period), the loan is not closed on a Saturday, a Sunday, or any federal or state holiday (all loans must close on a business day recognized by the lender), the HUD-1 settlement statement approved by the lender shows all fees that are imposed or collected by the title company, each borrower/owner of the homestead and their spouse has acknowledged in writing, at or prior to closing, that they have received a copy of the loan application and the final HUD-1 (or revised final HUD-1) AT LEAST THE BUSINESS DAY PRIOR TO the day of closing, no changes in the type or amount of any item or in the total amount reflected on the HUD-1 is made without the prior written approval of the lender, Continued on next page Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 22 of 27 Closing and Loan Settlement Documentation, Continued Closing Instructions, (continued) Closing Legal Documents if a change in the final HUD-1 is made, a revised HUD-1 reflecting this change is delivered to each borrower/owner of the homestead (and their spouse) and the closing rescheduled to the first or subsequent business day after the date of receipt of the revised disclosure by the last borrower/owner of the homestead or their spouse, the borrowers/owners of the homestead property receive (at closing) copies of all the documents they sign at closing, no documents signed at closing have any applicable blanks that are left to be filled in at the time the owner signs the documents, the borrower/owner of the homestead property or his spouse does not execute any document evidencing an election not to rescind under the threeday right of rescission before the expiration of the rescission period, any loan proceeds held by the title company are not disbursed prior to the expiration date the lender specifies for the three day right of rescission period, and the borrower/owner, their spouse and the lender signs the Affidavit of Fair Market Value of Homestead Property and an appraisal is attached to the written acknowledgment. The following table shows the required legal documents and investor forms. Legal Documents Texas Home Equity Fixed Rate Note (First Lien) Texas Home Equity Adjustable Rate Note (First Lien) Investor Form Fannie Mae/Freddie Mac Form 3244.1 Texas Home Equity Security Instrument (First Lien) Texas Home Equity Adjustable Rate Rider (First Lien) Fannie Mae 3044.1 Texas Home Equity Condo Rider, if applicable Texas Home Equity PUD Rider, if applicable Texas Home Equity Affidavit and Agreement Fannie Mae/Freddie Mac Form 3140.44 7/1 & 10/1 LIBOR ARM: Fannie Mae 3528.44 7/1 & 10/1 LIBOR ARM: Fannie Mae 3187.44 Fannie Mae/Freddie Mac Form 3150.44 Fannie Mae/Freddie Mac Form 3185 Continued on next page Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 23 of 27 Closing and Loan Settlement Documentation, Continued Document Warranties Escrow Waivers Lenders must use the mortgage documents for conventional mortgage loans that are correct for the jurisdiction, the mortgage type, the lien type and the property type. The lender must use the most current version and appropriate forms. SunTrust relies upon the Correspondent Lender’s representations and warranties that the loans are enforceable in accordance with the terms of the Correspondent Loan Purchase Agreement and comply with all applicable laws. Accordingly, it is advisable that forms and documents be reviewed by the Correspondent Lender’s legal counsel for compliance with the laws of the state in which each loan is made. Escrows waivers for taxes, hazard insurance and flood insurance (if applicable) are allowed. Reference: See Section 1.08: Loan Delivery and Purchase Review, in the Correspondent Seller Guide for guidelines concerning escrow waivers. Document Review Fee For all loans, a document review fee will be charged and will be deducted from proceeds at closing. Reference: See Section 1.08: Loan Delivery and Purchase Review, in the Correspondent Seller Guide, for information fee charges. Limitation on Fees Neither the borrower/owner nor their spouse may be required to pay, in addition to any interest, fees to any person that are necessary to originate, evaluate, maintain, record, insure, or service the extension of credit that exceed in the aggregate 3% of the loan amount. Reference: See Exhibit #1, “Allowable Fees and Charges” for a listing of the fees that are included in (or excluded from) the 3% fee cap limitation. Power of Attorney Powers of attorney for the borrowers are not acceptable. Right of Rescission All borrowers/owners and their spouse(s) must have the right to rescind a Texas cash-out refinance transaction (without incurring a penalty or charge) within three days after the extension of credit is made. The right of rescission may not be waived. NO EXCEPTIONS. Continued on next page Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 24 of 27 Closing and Loan Settlement Documentation, Continued Signature Requirements The lien on the homestead must be voluntary and created under a written agreement with the consent of each borrower/owner and their spouse(s). As a result, the signature of all borrowers/owners and their spouse(s) is required on all documents (with the exception of the Note) irrespective of whether the spouse has an ownership interest in the property or is a borrower on the loan transaction. Note: A spouse or owner who did not qualify for the mortgage is NOT required to execute the Note. Title Insurance In addition to standard SunTrust guidelines, the following requirements apply: A copy of the title commitment must be submitted with the underwriting package. For all Texas Section 50(a)(6) mortgages, a title insurance policy written on Texas Land Title Association forms (standard or short form), supplemented by an Equity Loan Mortgage Endorsement (Form T‐42) and a Supplemental Coverage Equity Loan Mortgage Endorsement (Form T‐42.1), is required. Note: There may be no exceptions or deletions to the coverage provided by Paragraphs 2(a) through (e) of the T-42 endorsement and the endorsement must include the optional coverage provided by Paragraph 2(f), as well as the additional coverage provide by Endorsement T-42.1. The title insurance policy cannot include language that: excludes coverage for a title defect that arises because financed origination expenses are held not to be “reasonable costs necessary to refinance” or defines the “reasonable costs necessary to refinance” requirement as a “consumer credit protection” law since the standard title policy excludes coverage when lien validity is questioned due to a failure to comply with consumer credit protection laws. References: See Section 1.16: Title Insurance of the Correspondent Seller Guide for additional information. See the following subtopic if the subject property is located in a development that is governed by a Home Owner’s Association. Continued on next page Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 25 of 27 Closing and Loan Settlement Documentation, Continued Subject Properties governed by a Homeowner’s Association (HOA) If the subject property is located in a development that is governed by a Home Owner’s Association (and since most of the Texas Home Owners Associations’ conditions, covenants and restrictions were recorded before the Texas equity law) either sufficient subordination verbiage in title commitment/policy, which must include Forms T-17 and T-19 title policy endorsement, or a separate subordination agreement is required. The conditions, covenants and restrictions must also be obtained and must be fully executed and recorded. Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide January 30, 2015 Page 26 of 27 Exhibit #1 – Allowable Fees and Charges The following table is a listing of the borrower paid fees that are include in (or excluded from) the 3% fee limit. Borrower Paid Fees Administrative Fee Appraisal Fee Assignment Fee Attorney Fee Brokerage Fee Certification that HOA Maintenance Fee is Current (i.e., HOA Recert Fee, HOA Statement of Account Fee) Closing Fee Commitment Fee Courier / Overnight Fee Copying Fee Credit Report Deed Restrictions Discount Points Note: Discount points MUST be bona fide (i.e., points must be paid to reduce the interest rate) Document Preparation (by Attorney only) Escrow Fee (Title Company) Escrow Waiver Fee Final Inspection Flood Certification Fee Flood Insurance Hazard Insurance HOA Maintenance Fees Late Charges Notary Fee Origination Fee Per Diem Interest Pest Inspection Post Default Attorney Fees Processing Fee Property Tax Property Tax Certification Property Tax Service Fee Recording Fees Subordination Agreement Survey Survey Deletion Tax Deletion Title Insurance Premium T-17, T-19, T-19.2, T-19.3, T-33, T-36, T-42, T-42.1 Endorsements Section 2.01c Texas Cash-Out Refinance Correspondent Seller Guide Included in 3% Cap Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No No Yes Yes No Yes No Yes No Yes Yes Yes Yes Yes Yes Yes Yes Yes January 30, 2015 Page 27 of 27
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